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Optimal taxation in infinitely-lived agent and overlapping generations models: a review

Optimal taxation in infinitely-lived agent and overlapping generations models: a review
Optimal taxation in infinitely-lived agent and overlapping generations models: a review
A survey of the literature on optimal taxation both in infinitely-lived agent models and life-cycle economies suggests that no consensus emerges regarding the optimal tax rate on capital income. Although the tax rate is invariably zero in the long-run steady state of infinitely-lived agent models, this same zero-tax prescription holds for life-cycle economies only under extremely stringent conditions. Both models suggest that capital income should be taxed at non-zero rates during the transition to long-run equilibrium unless individuals have separable preferences between consumption and leisure.
1069-7225
23-44
Erosa, Andrés
b1249afe-4ca0-44e0-9fba-c0646edd7c14
Gervais, Martin
c03b188f-08e2-42a6-abca-b64b362a4065
Erosa, Andrés
b1249afe-4ca0-44e0-9fba-c0646edd7c14
Gervais, Martin
c03b188f-08e2-42a6-abca-b64b362a4065

Erosa, Andrés and Gervais, Martin (2001) Optimal taxation in infinitely-lived agent and overlapping generations models: a review. Economic Quarterly, 87 (2), 23-44.

Record type: Article

Abstract

A survey of the literature on optimal taxation both in infinitely-lived agent models and life-cycle economies suggests that no consensus emerges regarding the optimal tax rate on capital income. Although the tax rate is invariably zero in the long-run steady state of infinitely-lived agent models, this same zero-tax prescription holds for life-cycle economies only under extremely stringent conditions. Both models suggest that capital income should be taxed at non-zero rates during the transition to long-run equilibrium unless individuals have separable preferences between consumption and leisure.

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Published date: 2001

Identifiers

Local EPrints ID: 47644
URI: http://eprints.soton.ac.uk/id/eprint/47644
ISSN: 1069-7225
PURE UUID: e0a827ab-22a6-4ee0-b4ec-2b31a56c3fc8

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Date deposited: 07 Aug 2007
Last modified: 15 Mar 2024 09:34

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Contributors

Author: Andrés Erosa
Author: Martin Gervais

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